Correlation Between Dynex Capital and Realty Income

Can any of the company-specific risk be diversified away by investing in both Dynex Capital and Realty Income at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Dynex Capital and Realty Income into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dynex Capital and Realty Income Corp, you can compare the effects of market volatilities on Dynex Capital and Realty Income and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Dynex Capital with a short position of Realty Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dynex Capital and Realty Income.

Diversification Opportunities for Dynex Capital and Realty Income

0.33

Correlation Coefficient

Dynex Capital  Realty Income

Weak diversification

The 3 months correlation between Dynex and Realty is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Dynex Capital and Realty Income Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Realty me Corp and Dynex Capital is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Dynex Capital are associated (or correlated) with Realty Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Realty me Corp has no effect on the direction of Dynex Capital i.e., Dynex Capital and Realty Income go up and down completely randomly.

Pair Corralation between Dynex Capital and Realty Income

Allowing for the 90-day total investment horizon Dynex Capital is expected to under-perform the Realty Income. In addition to that, Dynex Capital is 1.03 times more volatile than Realty Income Corp. It trades about -0.23 of its total potential returns per unit of risk. Realty Income Corp is currently generating about -0.02 per unit of volatility. If you would invest  5,196  in Realty Income Corp on January 17, 2024 and sell it today you would lose (31.00) from holding Realty Income Corp or give up 0.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Dynex Capital  vs.  Realty Income Corp

Dynex Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dynex Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Dynex Capital is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Realty me Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Realty Income Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Dynex Capital and Realty Income

The main advantage of trading using opposite Dynex Capital and Realty Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dynex Capital position performs unexpectedly, Realty Income can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Realty Income will offset losses from the drop in Realty Income's long position.

The idea behind Dynex Capital and Realty Income Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Share Portfolio module to track or share privately all of your investments from the convenience of any device.